Solving the food crisis

Eliminating hunger and malnutrition, and achieving wider global food security are among the most intractable problems humanity faces. While many once-poor countries are now developing rapidly, the world as a whole is unlikely to meet the first Millennium Development Goal target of halving, between 1990 and 2015, the proportion of the world’s population who suffer from hunger. Though the proportion of undernourished people in the world has fallen, the pace of reduction has slowed and the absolute numbers remain stubbornly high. And a number of countries–mostly in Africa and South Asia–have seen no improvement at all.

Higher food prices have not helped, but price levels are not the fundamental problem. High prices impose undeniable hardship on the poorest consumers, including many subsistence farmers whose production is insufficient to meet their consumption needs. Yet the persistence of global hunger–the chief manifestation of food insecurity–is a chronic problem that predates the current period of higher food prices. Indeed, there were as many hungry people in the world in the early 2000s, when international food prices were at an all-time low, as there are today. Similarly, high food prices have made little difference to the overall downward trend in the proportion of undernourished people.

The fundamental problem remains poverty and inadequate incomes. Even in this period of tighter world food markets, there is enough food available. Many people are just too poor to afford it. Broad-based income growth is essential to reduce global hunger in a sustainable way.

Agricultural development has a key role to play in generating the incomes needed to ensure food security. Between a half and two-thirds of the world’s poor live in rural areas, where agriculture is the dominant sector. Most of the farming is done by smallholders, and in a context of higher food prices, there are better opportunities for smallholder farmers to develop commercially viable operations than there have been for many years. Yet the realisation of those opportunities by some smallholders will result in others moving out of agriculture into new, ultimately more remunerative, activities. Indeed, it is important to recognise that–as all OECD countries have experienced–the majority of future generations will have better opportunities outside agriculture than within it.

A range of policies can improve the opportunities of poor households, both within and outside agriculture. Improvements in education and primary healthcare can strengthen income growth. Along with clean water, they also improve nutrition directly. Equally important is the overall investment climate, which depends on fundamental factors such as peace and stability, sound macroeconomic management, good governance and developed institutions, clear property rights, and adequate physical infrastructure. These policies are good for farmers–but they do not deter them from seeking out other non-farm opportunities as they emerge.

The OECD-FAOAgricultural Outlook 2012-2021 suggeststhat structurally higher food prices are here for the coming decade. Strong demand and prices will provide farmers with the incentives needed to feed a world population that is expected to exceed 9 billion by 2050. But policymakers can further stimulate the supply response. There is a strong case for increasing the share of public spending in support of agriculture, and redressing urban bias in the allocation of resources. There are high returns to investments in innovation: agricultural research, technology transfer, and farm extension and advisory services. These investments help farmers directly; indirectly they increase overall food supply, helping to contain upward pressure on food prices and dampen the price volatility associated with tight markets.

Open markets have a crucial role to play in raising production and incomes. Trade enables production to be located in areas where resources are used most efficiently and has an essential role in getting products from surplus to deficit areas. Trade also raises overall incomes through the benefits to exporters (in the form of higher prices than would be received in the absence of trade) and importers (through lower prices than would otherwise be paid), while contributing to faster economic growth and rising per capita incomes.

Trade will be essential if supply increases are to be achieved sustainably. Trade also enables production to locate in areas where natural resources, notably land and water, are relatively abundant, and where systems are more resilient to the effects of climate change. Looking ahead, the areas of the world with sustainable productive potential are not the same as the areas experiencing rapid population growth. Food security cannot be achieved by retrenching from the market and believing that smallholders alone can guarantee their own food security and those of local communities. Global food security will be underpinned by a mix of small, medium and large farms, and by domestic as well as international markets. There is no single panacea.

Countries where hunger is rife face many challenges, but the problems are not insurmountable. Income growth is necessary, but the composition of growth matters too, as more equal growth is likely to lead to faster improvements in the food security of the poorest. Other complements are vital: access to safe drinking water and sanitation; access to health services; better consumer awareness regarding adequate nutrition and childcare practices; and targeted distribution of supplements in situations of acute micronutrient deficiencies.

An important contribution that OECD countries can make, immediately, is to accelerate the reform of policies that create negative international spillovers. Agricultural protection remains high, and many OECD countries continue to provide trade-distorting subsidies that constrain development opportunities for more competitive suppliers and can export instability onto world markets. While the prevalence of such policies has declined significantly, there is still much room for improvement. In the current context of high agricultural prices, now is a good time to move rapidly towards alternative policy instruments that would contribute to sustainable productivity growth, underpinned by appropriate risk management and social protection policies. At the same time, OECD countries can avoid policies that contribute artificially to higher world food prices, most notably mandates for biofuel production.

Getting world food markets to function more smoothly will also require wider efforts at the multilateral level. While WTO members may have come close to a new agreement on agriculture, conclusion of the Doha Round of trade negotiations remains elusive. G20 governments have sought to tackle two immediate dimensions of the food security question: how to combat price volatility and improve the functioning of world markets, and how to achieve sustainable agricultural productivity growth (and bridge the gap for smallholders). The OECD, along with other international organisations, has provided analytical support to those initiatives. Some of the recommendations are for specific policy changes, but equally important is the need to share knowledge on which policies work best and how to adapt policies to country-specific contexts.

Increasingly, we understand the challenges to building global food security, and how more coherent and co-ordinated policies can accelerate progress. Increased financial resources are essential. Development aid can be a catalyst, complementing the primary role of private-sector investment. But national governments themselves have the responsibility for putting in place the conditions that will both attract these additional resources and ensure that the growth and employment benefits are widely shared.